By Guest commentary Friday, May 15th, 2026

By Bryan Esarco 

Nearly six million small to midsize businesses will be ready for transfer by 2035, according to Forbes. Being prepared is the first part of the sale process; are you and your family ready?

Here, I share what can create roadblocks to the transition and provide an action plan to mitigate them.

WHAT DOES IT MEAN TO BE READY TO EXIT?

Every business is different, and I’ve outlined two different business scenarios to walk through to help illustrate what I mean.  

Scenario #1: Profitable business with little owner involvement

If the business is running smoothly and they’re making money with little effort, a transition plan takes the back seat in priorities. However, a very real problem is the unknown. What if the owner/founder’s health declines, or they pass away? At that point, they leave their business with no idea how to continue in terms of ownership structure and long-term planning. Because no contingent buy/sell agreements were drafted, and key employee compensation programs or stay bonuses aren’t outlined, businesses can quickly devolve into chaos. 

The beneficiaries of the business are left with the complex task of the business transfer.  This subjects the business to undue risk and can place stress on the employee base and/or the remaining family, which can further harm business value.

Scenario 2: Highly owner-dependent business

On the other end of the spectrum are businesses with highly involved owners/founders.  If there is no transition plan in these scenarios, business value takes a significant hit. The more the business relies on a singular owner or key employee, the less valuable the business will be due to the associated risks related to that individual leaving the company.  

There needs to be a serious focus on transferring decision-making authority to other members of the leadership team. If there isn’t a leadership team, the owner must create one, with bonus points for those who include clear succession plans for key positions. 

In this case, it is difficult to transition this business to anyone (internal, external, family) when so much of the intangible knowledge used to run the business is in the mind of the owner. Even if the business is profitable, in the eyes of the market, value discounts will occur if the owner leaves. 

HIDDEN RISKS OF A FAMILY TRANSITION 

There are five hidden risks unique to family businesses. Founders and owners need to work to mitigate these risks several years before the planned exit.   

• Lack of an organization chart – Business owners preparing for transition need to create roles and fill those roles with competent employees. The big goal here is that the business has a leadership team capable of making day-to-day decisions and running the business. The leadership team is held accountable for its performance. 

• Major customer concentration risk – When a significant portion of a company’s business and profit is tied to one client, it becomes a challenge to navigate the departure of the founder/owner. This is a tough conversation because the business has an extreme risk of losing that client. Even if you are transferring ownership to family members, it is a transfer of risk, not value, because of the concentration of business. 

• Lack of liquidation strategy – Many owners are not clear on who they would like to sell the business to, or the person they want to sell it to isn’t qualified. A key employee earmarked for ownership may not actually want the business, or the business/employee may not be financeable for the liquidation value the owner is expecting to receive.   

• Family member is “in” the business, but not working – For family businesses, it’s common to have several family members who are not involved in the day-to-day work of the company but are listed on the payroll. This practice impairs the cash flow of the business and prevents the business from growing as well as possible. All family members on the company payroll should be providing equivalent value to the company for their pay. 

• Lack of formal governance – With a family-run company, often we have a lack of a formal governance structure, like a board of directors, a family charter or any process by which the family and the business operate in harmony.  

Family dynamics like rivalries can impact a sale, and I’ve seen it happen. It takes time, and it’s not necessarily fun, but business and family governance need to be addressed early on in the business lifecycle to assist in a smooth transition. 

FINAL NOTES

Founders should not wait to embark on a liquidation event a year from their retirement date.  Whether you are three years, five years, or 10 years from your exit, you can begin the planning process now. 

• Bryan Esarco is the vice president of business planning solutions at UMB Bank. He is an experienced strategic advisor for Business Value Growth and Transition/Exit Planning with more than 25 years in public accounting and academic instruction.